What Is the Difference Between Technical and Allocative Efficiency

Allocative efficiency (an economic concept) refers to how different resource inputs are combined to produce a mix of different outputs. Technical efficiency on the other hand is concerned with achieving maximum outputs with the least cost.

What is a technical efficiency?

Technical efficiency is the effectiveness with which a given set of inputs is used to produce an output. A firm is said to be technically efficient if a firm is producing the maximum output from the minimum quantity of inputs, such as labour, capital, and technology.

Which is a product of technical and allocative efficiency?

Economic or total efficiency is the product of technical and allocative efficiencies. An economically efficient input-output combination would be on both the frontier function and the expansion path.